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Mr. Kotlikoff’s calculations looked at how a couple’s spending and saving patterns might have to change if the government raised the full retirement age to 70 (we assumed it was imposed right away, though such a change would probably be phased in over many years). That would essentially translate to a 19 percent cut in monthly benefits, according to Mr. Kotlikoff. He performed the calculations using his company’s retirement planning software, ESPlanner, which shows what people need to save to ensure a consistent standard of living over the course of their lives.

Calculations done by Kotlikoff for msnbc.com suggest that attending a public college might make more financial sense than a private college. Private schools charge $26,300 a year on average, compared with $7,000 for in-state students at public, four-year schools, according to the College Board.

The program is a new feature of the ESPlanner financial planning software, developed by Laurence J. Kotlikoff, an economics professor at Boston University who has been perfecting his software for several years. Upside Investing still feels like a work in progress, and combing through the results will require more time (and patience) than your typical online program.

How long will you live? What will you eat during retirement? Are your adult children secretly planning to move back home? If you're stumped, you get the idea of how complicated and fraught with uncertainty saving for retirement can be.
Laurence J. Kotlikoff (left) thinks people are over-saving. Jonathan Skinner (right) says better safe than sorry. Financial planners often set savings targets based on replacing 70% or more of pre-retirement income. Yet recently a cadre of economists have challenged that approach, suggesting it often results in wildly misguided targets. Foremost among those fighting the orthodoxy is Laurence J. Kotlikoff of Boston University.

At the heart of the debate are the calculators used to determine retirement needs. The models, says Kotlikoff, use too little information to make meaningful recommendations. Moreover, the results are complicated by the inherent conflict of interest at most financial-planning firms: under many fee structures, the more people save, the higher the firms’ income. Consequently, says Bernicke, “there is a huge vested interest in how much is saved.”

FOR many retirees, Social Security benefits are seen as hot money on the table, to be devoured as soon as possible. But as with preparing and savoring a fine meal, a careful approach and delayed gratification may yield the highest rewards from the program.

There are tantalizing early-generation glimpses at what will become routine down the road. The three-decade-old investment firm Dimensional, built on cutting-edge academic finance theories on markets and investing, launched Dimensional Managed DC this year. It will design portfolios for employees to provide them with an inflation-protected income stream for life, after they answer a series of questions about their income and retirement goals. ESPlanner has developed a program that combines TIPS and equity index funds to put a floor on retiree living standards.

"Other programs ask you to put in your own retirement income target," explains Boston University economist Laurence Kotlikoff, who developed the software. "We find the spending target for you." The goal: to help you smooth your living standard over your lifetime.

ESPlannerPLUS requires you to answer significantly more questions than T. Rowe's calculator, but you'll get "the most accurate projections of any planning product I've seen," says Rick Miller, a financial planner in Waltham, Mass. Indeed, many financial pros use a version of the software themselves.

People often claim their benefits at the earliest age possible — 62. But experts say it’s best to wait until one’s full retirement age, or even age 70, which is when one is eligible for the largest monthly benefit possible. According to many experts, Social Security beneficiaries often leave a lot of money on the table by claiming early. It’s prudent, therefore, to run the numbers to determine the best age to claim.

When you want to start collecting Social Security isn’t necessarily when you should begin to collect Social Security. Another new calculator, called MaximizeMySocialSecurity, helps you compare those two options.

This tool, which costs $40 a year, was developed by Laurence J. Kotlikoff, an economics professor at Boston University, who also created the more comprehensive ESPlanner financial planning software.

Financial planners, with a handful of exceptions, completely ignore the economics approach to financial planning. Instead they do targeted-liability planning. They ignore the economics approach for one reason. It doesn’t make them as much money. Here’s why.

BOSTON. Would you be interested if I said there was a way to increase the value of your Social Security benefits by 15 or 20 percent?

Then listen up.

You’ve always known the decision about when, and how, to take Social Security benefits isn’t easy. But Larry Kotlikoff can tell you just how complicated it is. If his name looks familiar, it should be. The Boston University economics professor is often mentioned in my columns because I like his research and we’ve written three books together.

ESPlanner is based on underlying principles of academic economics. It is based on lifecycle finance, which involves maximization of lifetime expected utility. However, very cleverly, Kotlikoff built the software to simplify a few steps away from formal utility maximization. . . . What Kotlikoff does instead is allow users to specify whether they wish to make spending plans based on the assumption that they will earn the expected return from their investment portfolio, half of the expected return, a real return of zero, or an upside approach which assumes that the value of all stock holdings will go to zero, but will then add upside spending later as stocks are converted to TIPS. That last one was inspired from talking with Zvi Bodie. This is an alternative way of allowing users to estimate their own attitudes toward risk.

The idea behind consumption smoothing is that we all want to maintain our standard of living throughout our life. Meaning we don’t want to go through a period of time of being poor, then rich, then poor again. Nor do we want to get gradually poorer as we retire.